“South Africa is struggling to respond to gathering economic storm clouds,” says Patrick McGroarty in The Wall Street Journal. Government officials have admitted that growth is slowing sharply, the country’s currency – the rand – has been “battered in global markets”, while strikes have been wreaking havoc in the mining industry, “a pillar of exports and private investment”.
This isn’t just a bad week. The economy grew by just 2.5% last year – less than most of its emerging-market peers – and is expected to deliver the same this year. Given that the country relies on foreign capital to fund its budget and current-account deficits, it can’t afford to start scaring international investors. Moreover, Nigeria and Kenya are starting to emerge as serious rivals in sub-Saharan Africa.
The government response is worrying, says The Economist. It’s not that the government doesn’t know what to do, but rather that it’s hamstrung by domestic politics. South Africa’s structural problems include a poor education system, powerful unions and burdensome regulations. These contribute to the unemployment rate of 37%, rising to 53% for adults under 25 years old.
But any attempt to deal with these issues, such as the ruling African National Congress’s National Development Plan (NDP), invariably gets bogged down in political wrangling. “The NDP is stuck in an ideological cleft within the ANC between economic liberals in favour of it and left-leaning ministers allied to the unions who favour a statist approach.”
Vested interests also play a part, says McGroarty. The Congress of South African Trade Unions, which is allied to the government, “is sceptical of the plan’s platform of market-oriented policies… largely because of the prospective threats to its members’ jobs”. With both voters and investors growing uneasy, the government will have to do better, says The Economist. “Muddling through will no longer do.”